COVID-19: Survival, Recovery and Rebuilding the Restaurant Industry

Susan Hodkinson
| 5/4/2020
COVID-19 Survival, Recovery and Rebuilding the Restaurant Industry

There is no question that the hospitality industry has been among the hardest hit by COVID-19, with the business screeching to a halt in mid-March as part of the desperate effort to contain the spread of the virus. Restaurants are the fourth largest employer in the country, providing over 1.3 million jobs and accounting for seven per cent of the Canadian workforce.  Equally significant, restaurants are the centre of so much of the fabric of our day to day lives, places we gather and celebrate and connect.  What is next for this truly essential element of our communities?

While restaurant owners and operators are pivoting their business models to focus on delivery and take-out during dine-in prohibitions, pandemic-related changes in consumer demand and behaviour could have longer lasting effects. Restaurants already have tight profit margins and likely don’t have huge stores of financial liquidity set aside – so what does that mean now, in the midst of a global health crisis?

In this time of uncertainty, Susan Hodkinson, Chief Operating Officer and Partner, Human Resources Consulting, offers some responses to some of the questions we’re hearing from our clients in the hospitality industry. 

How can I support my employees and make sure they are taken care of?

We’re hearing that one of our clients’ primary concerns is the well-being of their most important asset – their staff. Employees who helped build businesses and lay foundations for success are now facing a whole new set of obstacles. We know how difficult it is to find great people to work with, let alone to keep them engaged and employed.

Most dine-in restaurants have not been able to keep all of their staff employed as before; however, there are immediate benefits available opportunities to offer benefits for employees and relief and flexibility for owner-operators.

Canada Emergency Wage Subsidy (CEWS)

The Government of Canada introduced a wage subsidy program to eligible employers, which reimburses businesses for a portion of salaries paid out to employees during the crisis. The hope is that, with the government covering some of these payments, companies will be able to either rehire staff or keep their employees on the payroll.

The subsidy covers 75 per cent of an employee’s wages on the first $58,700 of salary, which works out to $847 a week. The government expects employers to add 25 per cent more to that, bringing the annual total to $58,700. Learn how to apply for the CEWS here.

Supplemental Unemployment Benefit (SUB) Plan

Employers can apply to register a benefit plan to top up earnings of employees who are receiving Employment Insurance (EI).

Employers can top up employee earnings up to 95 per cent of their regular income, allowing employers to make additional contributions to employees without impacting their EI benefits. Employers must submit a copy of their SUB plan with a SUB plan registration form to Service Canada. Learn more about the program from Service Canada and get access to our SUB plan template here.

My business is struggling to afford rent. What can I do?

Canada Emergency Commercial Rent Assistance (CECRA)

The Canada Emergency Commercial Rent Assistance (CECRA) will provide forgivable loans to qualifying commercial property owners, covering 50 per cent of monthly rent for April, May and June. Effectively, commercial property owners will receive 75 per cent of their pre-coronavirus rental revenues for April, May and June – 50 per cent funded by the government in the way of these forgivable loans and 25 per cent received directly from the tenant.

What if an employee refuses work due to fear of contracting COVID-19?

The Occupational Health and Safety Act (OHSA) gives a worker the right to refuse work that they believe is unsafe to themselves or another worker. Employees cannot be fired for exercising a COVID-19 work refusal if they believe in good faith that they may contract the illness through their work.  

If you can absorb the loss of those employees, you should give them an unpaid leave of absence and let them stay away. If the employees are absolutely necessary to your operations, you should let them know that they are required to come into work, but you should put all reasonable precautions in place to protect them (i.e.: masks, gloves, proper sanitation, etc.).

If the employee takes the position that it’s an unsafe work environment, consult your provincial health and safety legislation for the guidelines around an alleged unsafe work refusal.

It is also important for restaurant owners to think about guaranteeing safety not just now, but in the future, post-COVID-19 world. For instance, many believe that salad bars, buffets and beverage stations will become a relic of the past. Start thinking about what both your employees and your customers will be comfortable with as you navigate going forward.

What strategic business plans should I consider long-term, post-COVID-19?

Smart business planning is essential, but realistically, nobody could have anticipated or planned for a crisis of this scale. Thinking about what businesses will look like in the future will require some flexible and intuitive thinking.

Ask yourself, “What might change in the future?”  As social distancing restrictions are lifted, how long will it take your restaurant to get back up and running again? Will you be reopening on a gradual, reduced basis (i.e.: starting at only 50 per cent capacity)? What will you require for staffing? What physical plant changes will you have to make in the front and back of house? Do you have the proper insurance policies in place?

Make sure you have a plan ready so when the restrictions are lifted, you’ll be prepared to jump back into business and work on bringing back the revenue stream.

Why am I being denied access to certain COVID-19 government relief and benefits?

When starting a business, it can be frustrating for smaller employers and appear to be more of a burden to comply with the HR rules and regulations that the province of Ontario sets out. However, these are the times where if you aren’t compliant with local HR regulations, you are going to have an even more difficult time accessing the financial relief and benefits that are out there. Businesses who ignored regulations like minimum wage requirements or labour laws, may find themselves ineligible for benefits available. Taking shortcuts in HR has consequences and will cost you more in the long run. Doing things properly and adhering to requirements the first time around pays off, instead of trying to play catch-up and fix existing issues during the middle of a pandemic.  A review of practices and protocols should be part of your recovery plan.

How can I protect my brand reputation during this crisis?

Down the road, companies and their leaders will be judged by how they handled (or didn’t handle) the COVID-19 pandemic. We know that it is not about whether or not they experienced the crisis; it is about how they managed it and how they recovered. The silver-lining throughout this pandemic is the opportunity to enhance your brand. Is your brand about comfort and safety? Is your brand about taking care of people and nurturing? Demonstrating your business’ core values to your staff, vendors, and customers now, will pay off in the future.

Are there other financial relief measures my restaurant would be eligible for?

From work-sharing to wage subsidies, we cover a complete summary of government benefits that your business may be eligible for in our detailed Round-up of Relief Measures, updated regularly.

How Can Crowe Soberman Support You?

In these uncertain times, it is essential to remain agile and proactive as the COVID-19 situation unfolds. Having timely access to financial experts, insights and news as quickly as possible is critical—and that’s where we can help.

We have established a dedicated COVID-19 Resource Hub, highlighting areas of business operations that will likely be impacted by coronavirus. Whether you need to discuss your current financial situation and learn what options are available to you, or you want to be guided through the appropriate cash flow management strategies for your business, our team of experts are ready to help you at every step of the way. Please do not hesitate to reach out to your Crowe Soberman professionals for support during these challenging times.

We are in this together.

This article has been prepared for the general information of our clients. Specific professional advice should be obtained prior to the implementation of any suggestion contained in this article. Please note that this publication should not be considered a substitute for personalized tax advice related to your particular situation.